Hambrick and Fredrickson’s Strategy Model

The strategy model produced by Hambrick and Fredrickson, also known as the strategy diamond, is a useful tool for managers and business owners in a wide variety of markets. As you already know, strategy is an incredibly important part of your everyday business operation.

Hambrick & Fredrickson’s Strategy Diamond

To make sure you give yourself the best possible chance at success moving forward, you have to have your strategy laid out clearly right from the start. Many businesses have failed due to a lack of strategy, so take time right away to outline how it is that you are going to get from where you are now to where you would like to be.

One of the challenges that you are certain to face when trying to make strategic decisions is making sure to include all of the relevant information in the process. It is easy to overlook bits and pieces of the overall picture, especially when you are dealing with a large business that has many moving parts. This is where the strategy diamond can come in handy. When you use this tool, you will be able to make sure that you are considering everything that is relevant to your decisions before you finalize them and move forward.

There are five total pieces that make up this ‘diamond’, and we will look at them one by one in the content below.

Arenas

Where is it that you are going to compete for market share? This is the first question that you are going to have to answer when using the Hambrick and Fredrickson model. Of course, this is a logical place to start, as all of the subsequent decisions that you make regarding your strategy are going to relate to the markets where you have chosen to compete.

Hambrick and Fredrickson Arenas

You have a number of options for ‘arenas’ that you can use to grow your business today thanks to the ubiquity of the internet and online shopping. Are you going to be selling straight to consumers through a number of retail channels, or are you building a business to business model instead? Whatever your plan, outline it in detail here before moving on to the next portion of the diamond.

Differentiators

How are you different from the competition? What is it about the products and/or services that you offer that will allow you to win in the market place? This is a crucial question that you absolutely must answer before you are going to be able to move forward successfully. In many ways, this question is at the heart of being in business. If there is nothing that is going to differentiate you from the crowd, you will not stand a chance of being successful.

Think about recent buying decisions that you have made in your own personal life. How did you make those decisions? Where they based on a certain factor that you valued over everything else? Most likely, you make the majority of your buying decisions on either quality or price. In some cases, you will buy an item because you know it is the best available. Other times, however, you will buy to save money, sacrificing quality for cost savings.

Hambrick and Fredrickson Differentiators

Turning that concept around and using it to think about your business, how are you going to compete for customers – on quality, or on price? Find a way to differentiate yourself from the rest of the market and you will have a shot to succeed in the short and long term.

Vehicles

Now that you have two huge questions out of the way – where you are going to compete, and how you are going to stand out – you will need to move on to the implementation side of the puzzle. How are you going to develop the products and services that you plan to sell? Is everything going to be done ‘in house’, or will you be partnering with other organizations to create goods that can be taken to market? This is another important point, because it will affect how fast you are able to grow, and how quickly you can get to the market with your goods. There are pros and cons to both sides of this debate, so there isn’t a ‘right or wrong’ answer – think about your situation and the market as a whole before finalizing a strategy for product development and launch.

Staging and Pacing

The path from ‘here to there’ isn’t always clear in business. In other words, you may have great plans for the future of your organization, but you need to have a strategy for getting from where you are now to where you would like to be later on.

Staging and Pacing

This is where the staging and pacing part of the diamond comes into play. Working from one logical step to the next is the only way to grow your company, as you will run the risk of going out of business if you get ahead of yourself along the way. Many previous organizations have been done in by rapid expansion that they were not ready to handle – and that is a legacy that you do not want to follow with your own business. Put a growth strategy into place and follow it closely on your way toward the top.

Economic Logic

The final portion of the diamond is meant to pull everything together in the name of profitability (for a for-profit business). Are all of the decisions and strategy choices that have been made up until this point going to work together to generate profit? If not, where can you make adjustments to bring the business into the black? At the end of the day, you will need to turn a profit if you are going to be around for the long run. Only when your strategy makes economic sense should you go ahead with the plans that you have put into place during the previous steps. As long as it all ‘adds up’ at the end and your strategies play nicely into one another, you should be able to move forward with confidence.

Key Points

  • The model covers strategy formulation and helps answer questions about what the strategy is and what it will be in the future.
  • It suggests that good strategies include answers to a series of related questions spanning target markets, growth vehicles, speed and path of strategic change, and financial deliverables.
  • Arenas encompass choices made about where to compete: the external environment such as product or service markets, geographic markets or channels. They also identify activities that are outsourced.
  • Differentiators are those factors that are believed to allow the firm to compete effectively in its targeted arenas, and include image, price, and reliablity.
  • Vehicles identify the degree to which the strategy relies on internal development efforts relative to partnering with external parties.
  • Staging and pacing refer to the sequence and speed of strategic moves, helping identify decision points since strategic moves don’t have a single possible pathway.
  • Economic logic reflects how all the pieces tie together in a way that satisfies key stakeholders.

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